New Delhi: Paving the way for world’s prominent retail giants like US’s Walmart, Carrefour of France and many others to have a major stake in India’s retail sector, the UPA government on Thursday notified its decision to allow 51 percent FDI in multi-brand retail sector.

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FDI in multi-brand retail

With this notification, 51 percent FDI in retail has become a reality which has once again triggered spate of criticism for the Prime Minister Manmohan Singh led UPA government at the Centre.

In the backdrop of severe criticism from both within and outside the UPA and Thursday’s nationwide strike, Prime Minister is likely to address to the people to justify his Cabinet’s decision pushing forward economic reforms especially on allowing FDI in multi-brand retail.

  • 51 percent FDI in multi-brand retail (click here)
  • 49 percent FDI in civil aviation (click here)
  • FDI cap in broadcasting raised from 49 percent to 74 percent (click here)
  • Sale of equities in four PSUs including Hindustan Copper Ltd (9.59 percent), Nalco (12.15 percent), Oil India Ltd (10 percent) and MMTC (9 percent)
  • Foreign investment in power exchanges
  • Delhi, Assam, Maharashtra, Andhra Pradesh, Rajasthan, Uttarakhand, Haryana, Jammu & Kashmir, Manipur, Daman & Diu and Dadra and Nagar Haveli are in support of the UPA government’s move
  • Bihar, Karnataka, Kerala, Madhya Pradesh, Tripura and Odisha have formally stated their opposition
  • Key UPA ally TMC chief Mamata Banerjee opposing the decision has withdrawn support from the UPA government (click here)
  • TMC ministers will resign today (September 21) (click here)
  • TMC had given 72-hour deadline that ended on September 17 to government to rollback decision. But the government refused to entertain the demand
  • Opposition including Samajwadi Party (outside supporter of UPA) and DMK (UPA ally) staged a nationwide strike on September 20 protesting the bold decisions of the government (click here)
  • Corporate America hails FDI decision, calls it a Big Bang reforms (click here)
  • Indian Staffing Federation (ISF) report says FDI will create 10 mn jobs in 10 years (click here)

While TMC, the second largest UPA constituent, is all set to withdraw its support and pull out its ministers on Friday, SP and DMK have also opposed these policies.

Under the notification relating to FDI in multi-brand retail, multinational companies can invest up to 51 percent to open stores in 10 states and UTs which have so far agreed to implement the decision.

"51 percent FDI in multi-brand retailing, in all products, will be permitted ...," a notification by the Department of Industrial Policy and Promotion (DIPP) said. It said the decision will take immediate effect.

In the most controversial area of FDI in multi-brand, the DIPP said the State Governments and UTs would be free to take their own decisions.

"Therefore, retail sales outlets may be set up in those States which have agreed, or agree in future, to allow FDI in MBRT (multi-brand retail trading) under this policy."

Minimum amount to be brought in by the foreign investor would be USD 100 million and outlets may be set up only in cities with a population of more than 10 lakh.

At least 50 percent of FDI in multi-brand retail should be in 'back-end infrastructure' within three years of the first tranche.

FDI in aviation

The government also operationalised September 14 Cabinet decisions allow 49 per cent FDI by foreign airlines in the domestic carriers and relax sourcing norms for foreign retailers investing beyond 51 percent in single-brand retail.

Investments in the aviation sector would be made under the government approval route and the parties need to comply with regulations of Securities and Exchange Board of India.

Earlier, no foreign airline was allowed to invest in Indian carriers directly or indirectly.

FDI in power exchanges, foreign equity cap

Besides, the decisions on permitting 49 percent FDI in power exchanges and increase in foreign equity cap from 49 percent to 74 percent in the service providers like DTH in broadcasting sector have also been notified.

States over FDI

On multi-brand retail front, only 10 states and UTs have so far agreed to FDI. These are Andhra Pradesh, Assam, Delhi, Haryana, Jammu & Kashmir, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman & Diu and Dadra and Nagar Haveli.

Major states like Uttar Pradesh, Tamil Nadu, West Bengal and Gujarat are opposing FDI in retail.

Reactions over FDI decision

The major domestic retailers welcomed the decision.

Future Group CEO Kishore Biyani said, "Finally FDI is here. So, that is a very good news. There is no threat to us from foreign retailers."

Aditya Birla Group, Business Director (Apparel & Retail Business) Pranab Barua said, "We have to still wait and watch what happens at the state level. This will help the sector."

Diluting the earlier norms in the single-brand retail, the DIPP said the 30 per cent sourcing by the global firms "will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors".

Swedish retailer IKEA, which planned to invest Rs 10,500 crore in India, had sought relaxations in this regard.


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